Twinlab To Discontinue Ephedra Products

HAUPPAUGE, N.Y.--Twinlab Corp. (NASDAQ:TWLB) will discontinue its ephedra-containing supplements, effective March 31, 2003. Instead, the company will be concentrating on launching a line of ephedra-free products under its national brands, which include Ripped Fuel, Diet Fuel and Metabolift. Products containing ephedra accounted for approximately 21 percent of the company's net sales for fiscal 2001.

"We were recently granted a U.S. patent on one of our weight-loss formulations, which puts us in a unique position to respond to the growing consumer demand for efficacious, ephedra-free products," said Ross Blechman, Twinlab's chairman, president and chief executive officer.

In the company's 2001 year-end report (FY01) filed in April 2002, the company stated the Food and Drug Administration (FDA) may one day require Twinlab to substantially reformulate and relabel almost all of its ephedra products; prohibit certain combination products; and preclude the company from making certain claims for such products.

Twinlab acknowledged in its report that comments from industry members and Congress have been filed with the FDA challenging the scientific and legal basis for these proposed regulations, and that the General Accounting Office had concluded FDA's proposed regulations needed to provide better evidence to support its stance on ephedra supplements.

"The company is not able to predict whether the FDA's proposed regulations will become final," Twinlab said. "A number of state governments have proposed or passed legislation regulating the sale of products that contain ephedra. The company believes its products are in material compliance with these state laws. [However], there can be no assurance as to whether any resulting reformulation, relabeling or change in the marketing of the company's products that contain ephedra would have a material adverse effect on the sales of such products or the company's results of operations and financial condition."

Twinlab has also been the defendant in several pending ephedra-based lawsuits over the years. Some suits allege that Twinlab's ephedra products caused injuries, death and/or damages; other suits seek class action certification for alleged deceptive advertising claims. The company, as of April, intended to vigorously defend these lawsuits.

For 2002, the company's liability insurance for ephedra products did not cover legal defense costs (which were a covered expense under prior insurance programs). This new insurance also provides significantly lower coverage limits and higher self-insured retentions, as well as requires the company to pay higher premium costs.

"One or more large punitive damage awards, which are generally not insurable, could have a material adverse effect on the financial condition and results of operations of the company," Twinlab said in its FY01 report. "It is premature for the company to estimate a range of potential losses, if any, in connection with these lawsuits. There can be no assurance that the company will not be subject to further private civil actions with respect to its products containing ephedra."

These sentiments were echoed in Blechman's official statement, released Nov. 11, regarding the company's new position on ephedra supplements. "We believe [discontinuing ephedra products] is a sound business decision in the current climate of escalating insurance costs and regulatory uncertainties, and are confident that our long history of providing safe and effective products ... will make this a positive move for the company, its customers and its consumers," he said, adding that the company expects to experience a reduction in net sales due to this continuation but anticipates it to have no effect on the company's profits.

The ephedra-free formulation has already been tested in a recent clinical study, in which it was found supplementation led to a 13-percent decrease in body fat.

The company did not return calls for comment by press time. It is unknown what ingredients are in the new ephedra-free formula.

In additional company news, executive vice presidents Neil and Brian Blechman retired from the company; they will continue to serve on the board of directors.